Monday, August 06, 2007

The scoop on José Blanco - Partner, Central Valley Fund

ProfileEquity fund hopes it will be able to start all over again in 2015Sacramento Business Journal - August 3, 2007The scoop on José BlancoWho is he?Partner, Central Valley Fund; principal, Gael Partners LLCThe essentialsAge: 51Born in New York City; lives in Davis and Columbus, Ohio; his son, who graduated from high school this year, lives in OhioEducation: B.A. in economics and political science, St. Michael's College; B.S. in economics, University of Utah; M.B.A., Claremont Graduate University; Ph.D. in economics, Utah State UniversityHis favorite thingsBooks: "Leviathan" by Thomas Hobbes; "The Fountainhead" by Ayn Rand Movie: "A Beautiful Mind" Restaurants: Mason's, Sacramento; Jockey, MadridMusic: Mozart, "my son's rock band, The Ladybirds"Pet peeve: "Parents who don't parent"

José; Blanco's business is helping businesses. He is a partner in the Central Valley Fund, started in 2005 to provide private capital for established small to midsized businesses.

"Many times, the entrepreneur's own capital and the capital a bank is willing to loan is not enough to finance the expansion or acquisition the entrepreneur wants to accomplish," Blanco said. "We provide the equity or debt financing to help the entrepreneur do what he wants to do. It fills the gap between what the entrepreneur has and what a bank is willing to provide. ...By our investment, or finding an investor, we ameliorate the bank's risk. It adds another layer of equity under the bank's involvement."

The fund has an office in Davis, where Blanco works, and one in Fresno.

How did the fund begin?

Gael Partners was founded in 2004 by some people connected with St. Mary's College in Moraga. I was a professor there. In fall 2005, we started Central Valley Fund. Gael Partners is the advisor; the fund is where investors put their money.

The partners in Gael all have extensive backgrounds in investment management. I have a Ph.D. in economics, and I worked for Aetna and AIG for many years. One of my partners worked for Chase Manhattan Bank.

The objective is not to be just advisors, but investors. We will invest $1 million to $5 million in a company to help it accomplish an expansion, recapitalization, a merger, a management buyout.

Without our capital, a company might grow 5 percent. With it, the same company might grow 20 percent. For example, a company might be able to contract with Wal-Mart, but only if it can increase productivity. It doesn't have the capital to hire more people and buy equipment. If we think the management team there can do the job, we help them do what they have to do to get that Wal-Mart contract. If we have doubts about the team, we don't make the investment.

Where does the capital come from?

Investors include CalPERS, Wells Fargo and a number of community banks. They invest in our fund, and we, in turn, invest in Central Valley companies. We're not a venture capital fund. We don't invest in startups. We're the only fund that can write a three- or four-million-dollar check for an existing, traditional business domiciled in this area, from Bakersfield to Redding.

For example, we invested in a necktie manufacturer that sells to Nordstrom, and in a chain of ambulatory surgical centers. In Fresno, we invested in a company that advises municipalities on how to improve their revenue and tax base. It was owned by a big national insurance company, and we helped management buy it from the parent.

In Sacramento, we invested $1.65 million in Administrative Systems Inc., a company that's been around since 1972. They provide benefit disbursement services to trust companies and unions, including the Screen Actors Guild.

The fund is able to invest $1 million to $5 million in each of 12 to 15 companies over the next five or six years.

How do you see the Central Valley's economy?

We are very optimistic about the economic future of the Central Valley. The cities -- Sacramento, Stockton, Modesto, Fresno, Bakersfield -- are all growing two and three times faster than the other major cities in the state. Companies realize that the Central Valley has been overlooked and that its cost of living, compared to the coastal area, makes it extremely attractive.

By 2015, we will have liquidated our investments and returned all the money to the investors. That's normally how these funds work, in 10-year cycles. Then, if we've been doing a good job and we and our investors made good money, we'll start Central Valley Fund II.

What brought you to where you are now?

My father was an engineer for Sperry Rand in Long Island, and then it moved its operations to Arizona right when I started high school. High school in Scottsdale after growing up in the Bronx, that was a culture shock, but quite pleasant.

When I was in the Bronx, I wanted to play for the Yankees, who had (Mickey) Mantle and (Roger) Maris and those guys back then. I was always interested in finance, though, and when I went to college, that's what I majored in. I got a basketball scholarship to St. Michael's, in Vermont. I played professionally in Europe for a couple of years, with Real Madrid. Then I hurt my knee, and that was the end of that. I worked for Aetna and then AIG, and came to California with AIG.